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NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Research Analyst Profession

Which is the key distinction between fundamental analysis and technical analysis as approaches used by research analysts?

Fundamental analysis estimates intrinsic value using economic, industry and company information, whereas technical analysis studies historical price and volume data to forecast trends. The other options reverse or blur these roles, wrongly attributing financial statement study to technical analysis or chart reading to fundamental analysis.

  1. AFundamental analysis studies price and volume patterns, while technical analysis studies financial statements
  2. BFundamental analysis estimates intrinsic value from economic, industry and company factors, while technical analysis studies price and volume data to forecast trendsCorrect
  3. CBoth rely only on past price charts
  4. DTechnical analysis estimates intrinsic value from the balance sheet, while fundamental analysis ignores financial statements

Explanation

Fundamental analysis seeks the intrinsic value using economy, industry and company information such as financial statements. Technical analysis uses historical price and volume data to identify trends and patterns. The reversed options swap the two approaches.

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